UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number: 2-88927
FIRST KEYSTONE CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2249083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
111 West Front Street, Berwick, PA 18603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 752-3671
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date:
Common Stock, $2 Par Value, 977,909 shares as of June 30, 1997.
PART I. - FINANCIAL INFORMATION
Item. 1 Financial Statements
FIRST KEYSTONE CORPORATION
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
June December
1997 1996
ASSETS
Cash and due from banks $ 6,339 $ 5,147
Interest bearing deposits with banks 5,057 32
Available-for-sale securities carried
at estimated fair value 73,487 81,146
Investment securities, held to
maturity securities, estimated fair
value of $18,253 and $19,955 18,363 20,080
Loans, net of unearned income 146,699 133,261
Allowance for loan losses (2,302) (2,267)
Net loans $144,397 $130,994
Bank premises and equipment 3,371 2,881
Other real estate 0 46
Interest receivable 1,814 1,959
Other assets 383 272
Total Assets $253,211 $242,557
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing $ 18,140 $ 17,805
Interest bearing 186,456 180,741
Total deposits $204,596 $198,546
Short-term borrowings 4,936 5,121
Long-term borrowings 13,000 10,000
Accrued expenses 1,227 1,128
Other liabilities 326 289
Total Liabilities $224,085 $215,084
STOCKHOLDERS' EQUITY
Common stock, par value
$2 per share $ 1,956 $ 1,778
Surplus 9,761 6,655
Retained earnings 16,217 17,890
Unrealized gain (loss) on
investment securities available
for sale, net of taxes 1,192 1,150
Total Stockholders' Equity $ 29,126 $ 27,473
Total Liabilities and
Stockholders' Equity $253,211 $242,557
<FN>
See Accompanying Notes to Financial Statements
</FN>
1
FIRST KEYSTONE CORPORATION
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(Amounts in thousands except per share data)
1997 1996
INTEREST INCOME
Interest and fees on loans $3,159 $2,797
Interest and dividend income on
securities 1,516 1,563
Interest on deposits in banks 70 30
Total Interest Income $4,745 $4,390
INTEREST EXPENSE
Interest on deposits $2,029 $1,957
Interest on short-term borrowings 45 56
Interest on long-term borrowings 202 139
Total Interest Expense $2,276 $2,152
Net interest income $2,469 $2,238
Provision for loan losses 100 65
Net Interest Income After Provision
for Loan Losses $2,369 $2,173
OTHER INCOME
Service charges on deposit accounts $ 160 $ 141
Other non-interest income 120 137
Investment securities gains (losses)
net (7) (3)
Total Other Income $ 273 $ 275
OTHER EXPENSES
Salaries and employee benefits $ 613 $ 572
Net occupancy and fixed asset expense 207 181
Other non-interest expense 366 328
Total Other Expenses $1,186 $1,081
Income before income taxes $1,456 $1,367
Applicable income tax (benefit) 309 274
Net Income $1,147 $1,093
Net Income Per Weighted Share
Outstanding $ 1.17 $ 1.12
<FN>
See Accompanying Notes to Financial Statements
</FN>
2
FIRST KEYSTONE CORPORATION
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(Amounts in thousands except per share data)
1997 1996
INTEREST INCOME
Interest and fees on loans $6,145 $5,598
Interest and dividend income on
securities 3,127 2,968
Interest on deposits in banks 81 77
Total Interest Income $9,353 $8,643
INTEREST EXPENSE
Interest on deposits $4,026 $3,912
Interest on short-term borrowings 123 105
Interest on long-term borrowings 364 264
Total Interest Expense $4,513 $4,281
Net interest income $4,840 $4,362
Provision for loan losses 150 90
Net Interest Income After Provision
for Loan Losses $4,690 $4,272
OTHER INCOME
Service charges on deposit accounts $ 306 $ 271
Other non-interest income 259 246
Investment securities gains (losses)
net (1) (2)
Total Other Income $ 564 $ 515
OTHER EXPENSES
Salaries and employee benefits $1,272 $1,189
Net occupancy and fixed asset expense 399 388
Other non-interest expense 730 659
Total Other Expenses $2,401 $2,236
Income before income taxes $2,853 $2,551
Applicable income tax (benefit) 583 490
Net Income $2,270 $2,061
Net Income Per Weighted Shares
Outstanding $ 2.32 $ 2.11
<FN>
See Accompanying Notes to Financial Statements
</FN>
3
FIRST KEYSTONE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(Amounts in thousands)
1997 1996
OPERATING ACTIVITIES
Net income $ 2,270 $ 2,061
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision or loan losses 150 90
Provision for depreciation and
amortization 155 159
Premium amortization on investment
securities 60 88
Discount accretion on investment
securities (62) (42)
(Gain) loss on sales of investment
securities 1 2
Deferred income tax (benefit) (3) 43
(Gain) loss on sale of other real
estate owned (1) 0
(Increase) decrease in interest
receivable and other assets 34 (120)
Increase (decrease) in interest
payable, accrued expenses and
other liabilities 99 25
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 2,703 $ 2,306
INVESTING ACTIVITIES
Purchases of investment securities
available for sale $(10,945) $(35,035)
Proceeds from sales of investment
securities available for sale 16,885 15,579
Proceeds from maturities and
redemptions of investment
securities available for sale 2,358 2,984
Purchase of investment securities
held to maturity 0 (996)
Proceeds from maturities and
redemption of investment
securities held to maturity 1,165 1,998
Proceeds from sales of loans 0 65
Net (increase) decrease in loans (13,553) 1,314
Purchase of premises and equipment (645) (42)
Proceeds from sale of other real
estate owned 43 0
NET CASH USED BY INVESTING
ACTIVITIES $ (4,692) $(14,133)
FINANCING ACTIVITIES
Net increase (decrease) in
deposits $ 6,050 $ 5,719
Net increase (decrease) in
short-term borrowings (185) 4,953
Net increase (decrease)in
long-term borrowings 3,000 0
Cash dividends (659) (556)
NET CASH PROVIDED BY FINANCING
ACTIVITIES $ 8,206 $ 10,116
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENT $ 6,217 $ (1,711)
CASH AND CASH EQUIVALENTS, BEGINNING 5,179 6,620
CASH AND CASH EQUIVALENTS, ENDING $ 11,396 $ 4,909
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during period for
Interest $ 4,377 $ 4,352
Income Taxes 555 501
<FN>
See Accompanying Notes to Financial Statements
</FN>
4
FIRST KEYSTONE CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1.
The accounting and reporting policies of First Keystone
Corporation and Subsidiaries conform to generally accepted accounting
principles and to general practices within the banking industry.
These consolidated interim financial statements include the accounts
of First Keystone Corporation and its wholly owned subsidiary, The
First National Bank of Berwick. All significant inter-company
balances have been eliminated.
Note 2.
The accompanying consolidated interim financial statements are
unaudited. In management's opinion, the consolidated interim
financial statements reflect a fair presentation of the consolidated
financial position of First Keystone Corporation and Subsidiary, and
the results of their operations and their cash flows for the interim
periods presented. Further, the consolidated interim financial
statements reflect all adjustments, which are in the opinion of
management, necessary to present fairly the consolidated financial
condition and consolidated results of operations and cash flows for
the interim period presented and that all such adjustments to the
consolidated financial statements are of a normal recurring nature.
Note 3.
The results of operations for the six-month period ended June
30, 1997, are not necessarily indicative of the results to be expected
for the full year.
Note 4.
Net income per share of common stock for the interim periods is
based on the weighted average number of shares outstanding for each
period; 1997 and 1996 - 977,909 shares after giving effect to stock
dividends.
Note 5.
LOANS
Loans are stated at their outstanding principal balances, net of
any deferred fees or costs, unearned income, and the allowance for
loan losses. Interest on installment loans is recognized as income
over the term of each loan, generally, by the "actuarial method".
Interest on other loans is primarily recognized based upon the
principal amount outstanding. Loan origination fees and certain
direct loan origination costs have been deferred and the net amount
amortized using the interest method over the contractual life of the
related loans as an interest yield adjustment.
Non-Accrual Loans - Generally, a loan (including a loan impaired
under Statement of Financial Accounting Standards No. 114) is
classified as non-accrual, and the accrual of interest on such a loan
is discontinued when the contractual payment of principal or interest
has become 90 days past due or management has serious doubts about
further collectibility of principal or interest, even though the loan
currently is performing. A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well secured.
5
When a loan is placed on non-accrual status, unpaid interest credited
to income in the current year is reversed and unpaid interest accrued
in prior years is charged against the allowance for credit losses.
Potential problem loans are identified by management as a part of its
loan review process.
Income recognition is in accordance with Statement of Financial
Accounting Standards No. 118. Certain non-accrual loans may continue
to perform, that is, payments are still being received. Generally,
the payments
are applied to principal. These loans remain under constant scrutiny
and if performance continues, interest income may be recorded on a
cash basis based on management's judgement as to collectibility of
principal.
Allowance for Loan Losses - The allowance for loan losses is
established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for
loan losses, and subsequent recoveries, if any, are credited to the
allowance.
The Corporation adheres to the principles provided by Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan as amended by Statement of Financial
Accounting
Standards No. 118, "Accounting by creditors for Impairment of a Loan -
Income Recognition and Disclosure." Under these standards, the
allowance for loan losses related to loans that are identified for
evaluation in accordance with Statement No. 114 is based on discounted
cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans.
Statement No. 118 allows the continued
use of existing methods for income recognition on impaired loans and
amends disclosure requirements to require information about the
recorded investment in certain impaired loans and related income
recognition on those loans. The allowance for loan losses is
maintained at a level by management to be adequate to absorb estimated
potential loan losses. Management's periodic evaluation of the
adequacy of the allowance for loan losses is based on the
Corporation's past loan experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability
to repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. this
evaluation is inherently subjective as it requires material estimates,
including the amounts and timing of future cash flows expected to be
received on impaired loans that may be susceptible to significant
change.
The following table presents the changes in the allowance for
credit losses:
Balance at January 1, 1997 $2,267
Provisions charged to operations 150
Loans charged off (141)
Recoveries 26
Balance at June 30, 1997 $2,302
At June 30, 1997, the recorded investment in loans that are
considered to be impaired under Statement No. 114 was $43,151. No
additional charge to operations is required since the total allowance
for loan losses is estimated by management to be adequate to provide
for the loan loss allowance under Statement No. 114 as well as any
other potential loan losses.
Note 6.
On April 15, 1997, the Board of Directors declared a 10% stock
dividend payable May 16, 1997, to shareholders of record May 2, 1997.
The stock dividend was valued based on the market price of $37.00 per
share on May 2, 1997. A total of 88,762 shares were issued as a
result of the stock dividend with a total value of $3,289,844,
including cash in lieu of fractional shares.
6
(Amounts in thousands except Common Shares data)
Common Common
Shares Stock Surplus
Balance at January 1, 1997 889,147 $1,778 $6,655
Net Income 0 0 0
10% stock dividend 88,762 178 3,106
Dividends paid in lieu of
fractional shares 0 0 0
Cash dividends - $.67 per
share 0 0 0
Change in unrealized gain
(loss) on investment
securities available
for sale 0 0 0
Balance at June 30, 1997 977,909 $1,956 $9,761
Net Unrealized
Gain (Loss)
on Investment
Securities
Retained Available
Earnings For Sale Total
Balance at January 1, 1997 $17,890 $1,150 $27,473
Net Income 2,270 0 2,270
10% stock dividend (3,284) 0 0
Dividends paid in lieu of
fractional shares (6) 0 (6)
Cash dividends - $.67 per share (653) 0 (653)
Change in unrealized gain
(loss) on investment
securities available
for sale 0 42 42
Balance at June 30, 1997 $16,217 $1,192 $29,126
Note 7.
As required on January 1, 1996, the Corporation adopted
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." The Statement requires
that long-lived assets and certain identifiable intangibles are
classified into two categories for the purpose of accounting for an
impairment of assets: those to be held and used and those to be
disposed of. Assets to be held and used must be reviewed whenever
events or changes in circumstances indicate that the carrying value
may not be recoverable. An impairment loss is indicated if the sum
of the expected future cash flows, undiscounted and without interest
charges, is less than the carrying amount of the assets. An
impairment loss must be recognized as the amount by which the carrying
amount of the asset exceeds the fair value of the asset so determined.
Implementation of this Statement did not have any effect on the
consolidated financial condition or results of operations of the
Corporation.
Note 8.
The consolidated interim financial statements have been prepared
in accordance with requirements of From 10-Q and therefore does not
include all the disclosures normally required by generally accepted
accounting principles, or those normally made in the Corporation's
annual 10-KSB filing. The reader of these consolidated interim
financial statements may wish to refer to the Corporation's annual
report or Form 10-KSB for the period ended December 31, 1996, filed
with the Securities and Exchange Commission.
7
Item 2. First Keystone Corporation Management's Discussion and
Analysis of Financial Condition and
Results of Operation as of June 30, 1997
RESULTS OF OPERATIONS
First Keystone Corporation realized record earnings for the
second quarter of 1997 of $1,147,000, an increase of 5% over the
second quarter of 1996. Six months net income for the period ended
June 30, 1997, amounted to $2,270,000, an increase of 10% over the
$2,061,000 net income reported June 30, 1996. On a per share basis,
net income per share increased to $2.32 for the six months of 1997
compared to $2.11 for the first six months of 1996, while dividends
increased to $.67 per share up from $.56 in 1996.
Year-to-date net income annualized amounts to a return on
average common equity of 16.18% and a return on assets of 1.84%. For
the six months ended June 30, 1996, these measures were 16.28% and
1.78%, respectively on an annualized basis.
NET INTEREST INCOME
The major source of operating income for the Corporation is net
interest income, defined as interest income less interest expense. In
the second quarter of 1997 and year-to-date in 1997, interest income
has increased more than interest expense resulting in improved net
interest income. In the second quarter of 1997, interest income
amounted to $4,745,000, an increase of $355,000 or 8.1% over the
second quarter of 1996. Interest expense amounted to $2,276,000 in
the second quarter of 1997, an increase of $124,000, or 5.8% over the
second quarter of 1997. Accordingly, net interest income amounted to
$2,469,000 in the second quarter of 1997, an increase of $231,000, or
10.3% over the second quarter of 1996. Year-to-date for the six
months ended June 30, 1997, total interest income increased $710,000,
or 8.2% over the first six months of 1996. Total interest expense
increased $232,000, or 5.4% for the first six months of 1997 over
1996. This resulted in net interest income increasing $478,000, or
11% for the six months ended June 30, 1997, over 1996.
Our net interest margin for the quarter ended June 30, 1997, was
4.57% compared to 4.46% for the quarter ended June 30, 1996. For the
six months ended June 30, 1997, our net interest margin was 4.54%
compared to 4.41% for the first six months of 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the quarter ended June 30,
1997, was $100,000 compared to $65,000 for the second quarter of 1996.
Year-to-date, the provision for loan losses increased to $150,000 in
1997 over the $90,000 provision for the period ended June 30, 1996.
The provision for possible loan losses was increased in 1997 to
cushion us against possible increased charge-offs associated with an
increase in loans of $20,678,000 from June 30, 1996, to June 30, 1997.
Net charge-offs totaled $115,000 for the six months ended June 30,
1997, as compared to $177,000 for the first six months of 1996. In
addition to the decrease in net charge-offs, our non-performing
assets, consisting of non-performing loans and foreclosed assets, was
$284,000 as of June 30, 1997, as compared to $324,000 as of June 30,
1996, representing .19% and .26%, respectively of loans net of
unearned income and foreclosed assets.
Loans past-due 90 days or more still accruing amounted to
$222,000 as of June 30, 1997, and $68,000 as of June 30, 1996. The
allowance for loan losses as a percentage of loans, net of unearned
interest was 1.57% as of June 30, 1997, and 1.53% as of June 30, 1996.
8
NON-INTEREST INCOME
Total non-interest or other income was $273,000 for the quarter
ended June 30, 1997, as compared to $275,000 for the quarter ended
June 30, 1996. Excluding investment security gains and losses, non-
interest income was $280,000 for the second quarter of 1997, an
increase of $2,000 over the second quarter of 1996. For the six
months ended June 30, 1997, total non-interest income was $564,000, an
increase of $49,000, or 9.5% over the first six months of 1996.
Increased fees generated by our trust department was the primary
reason for the $49,000 year-to-date increase in non-interest income.
NON-INTEREST EXPENSES
Total non-interest, or other expenses, was $1,186,000 for the
quarter ended June 30, 1997, as compared to $1,081,000 for the quarter
ended June 30, 1996. The increase of $105,000 is comprised of salary
and benefits increasing $41,000, occupancy expense increasing $26,000,
and other non-interest expense increasing $38,000.
For the six months ended June 30, 1997, total non-interest
expense was $2,401,000, an increase of $165,000, or 7.4% over the
first six months of 1996. Expenses associated with employee (salaried
employee benefits) continues to be the largest category of non-
interest expenses. Salaries and benefits amount to 53.0% of total
non-interest expense for the six months ended June 30, 1997, as
compared to 53.2% for the first six months of 1996. Salaries and
benefits amounted to $1,272,000 for the six months ended June 30,
1997, an increase of $83,000, or 7.0% over the first six months of
1996. Net occupancy expense amounted to $399,000 for the six-months
ended June 30, 1997, an increase of $11,000, or 2.8% over 1996. Other
non-interest expenses amounted to $730,000 for the six months ended
June 30, 1997, an increase of $71,000, or 10.8% over the first six
months of 1996. Our overall non-interest expense of less than 2% of
average assets on an annualized basis for 1997 and 1996, places us
among the leaders of our peer financial institutions at controlling
total non-interest expense.
INCOME TAXES
Effective tax planning has helped produce favorable net income.
The effective total income tax rate was 21.2% for the second quarter
of 1997 as compared to 20% for the second quarter of 1996. For the
six months ended June 30, 1997, our tax liability amounted to $583,000
for an effective tax rate of 20.4% as compared to an effective tax
rate of 19.2% for the first six months of 1996. The increase in our
effective tax rate was due primarily to the limited opportunities to
purchase municipal (tax-free investments) securities at attractive
interest rates.
ANALYSIS OF FINANCIAL CONDITION
ASSETS
Total assets increased to $253,211,000 as of June 30, 1997, an
increase of $10,654,000, or 4.4% over year-end 1996. Total deposits
increased to $204,596,000 as of June 30, 1997, an increase of
$6,050,000, or 3.0% over year-end 1996.
The Corporation used borrowed funds to support asset growth not
provided by deposit growth. Long-term borrowing increased to
$13,000,000 as of June 30, 1997, up from $10,000,000 at December 31,
1996.
9
EARNING ASSETS
Our primary earning asset, loan, net of unearned income
increased to $146,699 as of June 30, 1997, up $13,438,000, or 10.1%
since year-end 1996. The loan portfolio is well diversified and
increases in the portfolio have been primarily from increased
originations of real estate loans and commercial loans secured by real
estate.
With the substantial increase in loans, our investment portfolio
was reduced in size from December 31, 1996, to June 30, 1997. Held-
to-maturity securities amounted to $18,363,000 as of June 30, 1997, a
decrease of $1,717,000, or 8.6% since year-end 1996. Available-for-
sale securities amounted to $73,487,000 as of June 30, 1997, a
decrease of $7,659,000, or 9.4% from year-end 1996. Interest bearing
deposits with banks amounted to $5,057,000 as of June 30, 1997, up
from $32,000 as of December 31, 1996, as funds were kept short-term
for liquidity and in anticipation of funding loan commitments.
ALLOWANCE FOR LOAN LOSSES
Management performs a quarterly analysis to determine the
adequacy of the allowance for loan losses. The methodology in
determining adequacy incorporates specific and general allocations
together with a risk/loss analysis on various segments of the
portfolio according to an internal loan review process. Management
maintains its loan review and loan classification standards consistent
with those of its regulatory supervisory authority. Management feels,
considering the conservative portfolio composition, which is largely
composed of small retail loans (mortgages and installments) with
minimal classified assets, low delinquencies, and favorable loss
history, that the allowance for loan loss is adequate to cover
foreseeable future losses.
Any loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been disclosed under
Industry Guide 3 do not (i) represent or result from trends or
uncertainties which management reasonably expects will materially
impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of any
information which causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
The company was required to adopt Financial Accounting Standards
Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan" - Refer to Note 5 above for details.
NON-PERFORMING ASSETS
Non-performing assets consist of non-accrued and restricted
loans, together with foreclosed assets. As of June 30, 1997, total
non-performing assets were $284,000 as compared to $351,000 on
December 31, 1996. Non-performing assets to total loans and
foreclosed assets was .19% as of June 30, 1997, and .26% as of
December 31, 1996.
Loans past-due 90 days or more and still accruing amounted to
$222,000 as of June 30, 1997, as compared to $263,000 on December 31,
1996.
Interest income received on non-performing loans as of June 30,
1997, was $927 and $3,048 on December 31, 1996. Interest income,
which would have been recorded on these loans under the original terms
as of June 30, 1997, and 1996, was $10,792 and $18,261, respectively.
As of June 30, 1997 and December 31, 1996, there was no outstanding
commitments to advance additional funds with respect to these non-
performing loans.
10
DEPOSITS AND OTHER BORROWED FUNDS
As indicated previously, deposit growth amounted to $6,050,000
as total deposits increased to $204,596,000 as of June 30, 1997, up
from $198,546,000 as of year-end 1996. During 1997, the Corporation
experienced the vast majority of its deposit growth in interest
bearing deposits, in particular, an increase in certificates of
deposit.
CAPITAL STRENGTH
Normal increases in capital are generated by net income, less
cash dividends paid out. Also, net unrealized gains on investment
securities available-for-sale increased shareholders' equity, or
capital by $1,192,000 as of June 30, 1997, and $1,150,000 as of
December 31, 1996.
Leverage ratio and risk based capital ratios remain very strong.
As of June 30, 1997, our leverage ratio was 11.71% as compared to
10.87% as of December 31, 1996. In addition, Tier 1 risk based
capital and total risk based capital ratio as of June 30, 1997, were
19.80% and 21.05%, respectively. The same ratios as of December 31,
1996, were 19.29% and 20.55%, respectively.
LIQUIDITY
The liquidity position of the Corporation remains adequate to
meet customer loan demand and deposit fluctuation. Managing liquidity
remains an important segment of asset liability management. Our
overall liquidity position is maintained by an active asset liability
management committee.
Management feels its current liquidity position is
satisfactorily given a very stable core deposit base which has
increased annually. Secondly, our loan payments and principal
paydowns on our mortgage backed securities provide and steady source
of funds. Also, short-term investments and maturing investment
securities represent additional sources of liquidity. Finally, short-
term borrowings are readily accessible at the Federal Reserve Bank
discount window, Atlantic Central Bankers Bank, or the Federal Home
Loan Bank.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting of Shareholders of First Keystone
Corporation held on Tuesday, April 15, 1997, at 9:00
a.m.
Votes Votes
Directors Elected Votes For Against Withheld
Budd L. Beyer 754,543 6,453 0
Frederick E. Crispin, Jr. 754,543 6,453 0
Robert J. Wise 754,514 6,482 0
Broker
Directors Elected Abstentions Non-Votes
Budd L. Beyer 0 0
Frederick E. Crispin, Jr. 0 0
Robert J. Wise 0 0
Directors Continuing:
John Arndt, term expires in 1998
J. Gerald Bazewicz, term expires in 1998
Robert E. Bull, term expires in 1998
John L. Coates, term expires in 1999
Dudley P. Cooley, term expires in 1999
Stanley E. Oberrender, term expires in 1999
F. Stuart Straub, term expires in 1998
Matters Voted Upon:
Selection of J. H. Williams & Co., as auditors for the
Corporation. Votes For - 760,537
Votes Against - 48
Votes Withheld - 0
Abstentions - 411
Broker Non-Votes - 0
Item 5. Other Information
10% Stock Dividend - refer to Consolidated Notes to
Financial Statements Note 6 appearing on page 5 of
this Form 10-Q.
12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 Regulation S-K
Exhibit Number Description of Exhibit
3(i) Articles of Incorporation, as amended
(Incorporated by reference to Exhibit 3(i) to
Registrant's Annual Report of Form 10-KSB for
the year ended December 31, 1996.
3(ii) Bylaws, as amended (Incorporated by reference
to Exhibit 3(ii) to Registrant's Annual Report
on Form 10-KSB for the year ended
December 31, 1996.
10 Material Contracts
11 Statement RE: Computation of Earnings Per
Share.
27 Financial Data Schedule.
(b) The Registrant has filed no reports on Form 8-K
for this quarter.
13
FIRST KEYSTONE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRST KEYSTONE CORPORATION
Registrant
August 13, 1997 /s/ J. Gerald Bazewicz
President and
Chief Executive Officer
(Principal Executive Officer)
August 13, 1997 /s/ David R. Saracino
Treasurer/Assistant Secretary
(Principal Accounting Officer)
14
INDEX TO EXHIBITS
Exhibit Description Page
10 Material Contracts
Profit Sharing Plan Summary 16
Deferred Compensation 17
Other Executive Benefits
(Incorporated by reference to
Exhibit 99 (Page 9) of the
Corporation's Annual Report on
Form 10-KSB for the year ended
December 31, 1996)
Management Incentive Compensation Plan 18
11 Compensation of Earning Per Share 19
27 Financial Data Schedule
15